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Solutions Workshop – Auctions in the Cloud
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Solutions Workshop – Auctions in the Cloud

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eAuctions have been around for awhile now… but what is new in this area? Come to this session to see what is new with Auctions in the Ariba and to hear what customers are doing with Auctions in the …

eAuctions have been around for awhile now… but what is new in this area? Come to this session to see what is new with Auctions in the Ariba and to hear what customers are doing with Auctions in the cloud today. We will work through an exercise in groups to demonstrate some auction concepts, and a member of the Ariba Best Practice Center will be on hand to facilitate discussion about driving toward auction success.

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  • 1. Auctions in the CloudApril Miller, Sr. Consultant, BPC, AribaJoanna Smith, The Estée Lauder Companies© 2013 Ariba, Inc. All rights reserved.
  • 2. #AribaLIVEAgenda• Welcome• Customer Story: The Estée Lauder Companies• Paint Auction Example: Mobile Mini• Interactive Activity: Let’s Lot• Interactive Activity: Play by the Rules• Closing Remarks and Takeaways© 2013 Ariba, Inc. All rights reserved.2
  • 3. #AribaLIVEWelcomeJoanna M. SmithGlobal Indirect Procurement, Estée Lauder CompaniesStrategic sourcing manager with eight years of professional experience. Currently withThe Estée Lauder Companies, Joanna sources goods and services for various internalBrands and corporate functions. Represents GIP on cross-functional teams, collectsand analyzes baseline data, drafts RFXs, develops evaluation matrices and financialmodels, facilitates oral presentations and negotiations. She led the Aribaimplementation team and continues to train global users and facilitate online events.Joanna has a bachelor’s degree in Economics from Wesleyan University and maintainsa professional designation as a Certified Professional in Supply Management from theInstitute of Supply Chain Management.© 2013 Ariba, Inc. All rights reserved.3
  • 4. #AribaLIVESelecting the Right Opportunity• Six C’sContractually AvailableCommercially AttractiveCompetitive Supply BaseClearly Defined RequirementsCompressible MarginsCommitment• Scope is clear and consistent: apples to apples• Preferred or competitively based relationship• Market evidence of competition© 2013 Ariba, Inc. All rights reserved.4
  • 5. #AribaLIVEPaint Auction Example• Category: Paint• Leveraged volume with Smile Brands• Annual Spend: $2 Million Category spend grew 40+% previous year• 4 paint types = 92% spend• Primary incumbent for both brands• Locations also purchasing from 10+other vendors in a mix of colors andcontainer sizes• Incumbent increased PPG (Price PerGallon) by 8% in Jan 12’• 25 bids received during the auction• Achieved lower price on all itemsBackgroundBuild Auction• Collect baseline data and specs• Supplier discovery via Ariba DiscoveryNetworkAuctionReleased• Auction released to 5 pre-qualified nationalpaint suppliersPre-BidsSolicited• Pre-Bids received and reviewedAuction• Auction held one week after pre-bids received• Draft auction held 2-3 days priorSupplierSelection• Supplier selection made one week afterauction• New prices effective within 2 weeksProcess5-7Weeks
  • 6. #AribaLIVEPaint Auction ExampleAward Strategy Total Paint SpendProjected SavingsDifferentiatorLead Bid,Historical Volume Mix$120,910 (5%) • Award all liquid paint business to lowestbidder for each paint type.• Utilizes historical product volume mix.Orders split 55/45 in 55 gallon drums to 5gallon buckets.Cherry Pick LowestPrice,Revised Volume Mix$190,470 (9%) • Awards business to 3 suppliers based onlowest bidder of each item.• Must order at least 90% in 55 gallon drumsSole Source,Revised Volume Mix$174,370 (8%) • Awards all paint business to lowest solesource bidder• Must order at least 90% in 55 gallon drums© 2013 Ariba, Inc. All rights reserved.6Awarded Sole Source to lowest supplier, previous incumbentROI = 30.4x
  • 7. #AribaLIVEInteractive Activity: Let’s LotItem Quantity CurrentPriceDeliveryLocationCurrentSupplier1 100 $5.50 PA ABC Co.2 250 $10.98 PA XYZ Inc.3 1000 $15.50 DC ABC Co.4 200 $6.87 CA XYZ Inc.5 100 $12.98 DC Item Co.6 500 $10.25 PA ABC Co.7 500 $10.25 PA ABC Co.8 250 $7.50 CA XYZ Inc.9 1000 $11.00 DC Item Co.10 500 $8.98 DC Item Co.• Award GoalSupplierCompressionBest PriceLocal AwardOptionsGlobal SupplierMaintainIncumbents© 2013 Ariba, Inc. All rights reserved.7
  • 8. #AribaLIVEActivity DiscussionThe goal of lotting is to combine goods or services intological groups or “lots” to encourage competitive pricingand overall supplier participation. Objective from lottingshould be driven based on project award goals:• Foster competition• Reduce complexity• Prevent “cherry picking”• Drive award scenarios• Implementation Feasibility© 2013 Ariba, Inc. All rights reserved.8
  • 9. #AribaLIVEInteractive Activity: Play by theRulesItem Quantity CurrentPriceDeliveryLocationCurrentSupplierABC Co. XYZ Inc. Item Co. NewOrg.1 100 $5.50 PA ABC Co. $5.50 $5.00 - $4.752 250 $10.98 PA XYZ Inc. $9.50 $10.50 - $16.983 1000 $15.50 DC ABC Co. $15.50 $10.25 $10.00 $9.504 200 $6.87 CA XYZ Inc. - $6.55 $6.50 $7.005 100 $12.98 DC Item Co. $13.00 $15.00 $12.25 $17.986 500 $10.25 PA ABC Co. $10.25 $5.75 - $6.007 500 $10.25 PA ABC Co. $10.25 $6.00 - $6.258 250 $7.50 CA XYZ Inc. - $7.00 $7.75 $7.009 1000 $11.00 DC Item Co. $12.00 $8.00 $11.00 $6.5010 500 $8.98 DC Item Co. $8.75 $8.00 $8.25 $9.50Item Quantity CurrentPriceDeliveryLocationCurrentSupplierABC Co. XYZ Inc. Item Co. NewOrg.1 100 $5.50 PA ABC Co. $5.50 $5.00 - $4.752 250 $10.98 PA XYZ Inc. $9.50 $10.50 - $16.983 1000 $15.50 DC ABC Co. $15.50 $10.25 $10.00 $9.504 200 $6.87 CA XYZ Inc. - $6.55 $6.50 $7.005 100 $12.98 DC Item Co. $13.00 $15.00 $12.25 $17.986 500 $10.25 PA ABC Co. $10.25 $5.75 - $6.007 500 $10.25 PA ABC Co. $10.25 $6.00 - $6.258 250 $7.50 CA XYZ Inc. - $7.00 $7.75 $7.009 1000 $11.00 DC Item Co. $12.00 $8.00 $11.00 $6.5010 500 $8.98 DC Item Co. $8.75 $8.00 $8.25 $9.50© 2013 Ariba, Inc. All rights reserved.9
  • 10. #AribaLIVEActivity DiscussionMarket feedback given during an event should be used todrive competition. Suppliers need to receive informationto understand where they are in the market andencourage additional bids.• Starting Gate• Lead Bid• Rank• Full Disclosure• Line Item Ranking© 2013 Ariba, Inc. All rights reserved.10
  • 11. #AribaLIVEClosing Remarks• Characteristics of successful auctionsSelect the Right Opportunity (6 C’s)Prequalified ParticipantsDirectly Comparable PricingClear RequirementsLotting and Market Feedback StrategySupplier Communication© 2013 Ariba, Inc. All rights reserved.11
  • 12. Questions?© 2013 Ariba, Inc. All rights reserved.12